Please I need this Thursday......
PRINCIPLES OF BUSINESS FINANCE Assignment 1: 2Live Venue
In this assignment, you will apply the principles of forecasting discussed during week 1 in order to complete financial pro forma projections. The business chosen for this assignment is the 2Live Venue, a live venue where indie bands will perform in front of an audience during the week. Details about the venue are listed in the questions below. Some items in the spreadsheet have been completed while others will need to be completed by you. Your goals are to make the business profitable within 2 years on the income statement and ensure that the business raises enough money on the capital investments page so that it never runs out of cash (which can be determined on the cash flow statement). Please save and submit only the completed Excel workbook by the due date on FSO. This is a GROUP ASSIGNMENT, so please include the names of all students in your group within the filename of the file that one of your group members submits. Begin by pasting these links into your web browser and reviewing: http://revenueanalytics.com/wp-‐content/uploads/2013/11/Billboards-‐ TICKETONOMICS.pdf http://media.ticketmaster.com/en-‐ us/img/static/ticketlogy/images/2012_Concert_Trends_v11.pdf Please answer the following questions by entering the appropriate numbers in your Excel spreadsheet in order to demonstrate that the 2Live Venue breaks even and earns a profit within two years. Since the financial statements are interconnected, information in the marketing budget and sales projections will automatically show up on the income statement. Be patient as you enter all this information and frequently monitor the bottom line of the income statement in order to ensure you break even. Likewise, the capital investments page automatically links to the cash flow statement. As you make changes to the capital investments page, showing capital raised, switch back to the cash flow statement and monitor the bottom line to ensure you raise enough capital to keep cash flow in the black (positive).
Questions: 1. Sales Projections
a. If the venue capacity is 300 seats, what unit volume should you expect, and how many tickets does this translate into in each quarter during the two years (shows are 4 nights per week)? Enter your answers into “unit volume” under the ticket sales revenue stream.
b. It is assumed that 30% of ticket buyers spend money on
merchandise. Given this assumption, what is the average price that merchandise should be sold at if the average cost is $4 per unit? Enter this into the “unit price” section of the merchandise revenue stream.
2. Marketing Budget Allocation
a. The indie acts that perform at the 2Live Venue tend to appeal to young consumers between the ages of 18 and 35, especially young professionals and college students. What combination of marketing efforts should be undertaken to generate the level of revenue you have projected if the total marketing budget is $43,200 for the entire two years? Choose the 3 or 4 most effective categories, and spend your marketing dollars on the marketing budget spreadsheet, watching the grand total on the bottom-right side of the page.
3. Capital Investments / Cash Flow
a. How much money needs to be raised so that there are no months with end-of-month negative cash flow on the cash flow statement?
b. What combination of funding sources, how much for each, and how much equity should be given up in order to raise your target amount? Enter this info into the Capital Investments page. This is like the “Shark Tank” page and must show all 100% of the equity ownership.
HELPFUL HINTS! As you work on Assignment 1, keep in mind these things: The two most important goals of this assignment are to show a breakeven and profit within 2 years on the income statement, and ensure that there are no negative numbers on the cash flow statement. • How do you do this? By managing the other worksheets that flow into the Income
Statement and Cash Flow Statement. In other words, the Sales Forecast, the Marketing Budget (which flow into the Income Statement), then the Capital Investments page (this flows into the Cash Flow Statement).
• Start with the Sales Forecast, then try the marketing budget, then click over to the
Income Statement to look at the Net Profit at the bottom of that page. On the sales forecast, remember that the maximum capacity of this live venue is 300 seats per concert. However, it is a STARTUP business, therefore, some lower percentage (%) of the capacity should be estimated during the first quarter. In addition, a growing business shows sales growing (ramping up over time).
• Please spend the entire marketing budget mentioned in the instructions. • Don't spend marketing dollars on every item - focus your efforts on the 2 or 3
major types of efforts that you believe will attract the type of customer mentioned in the instructions.
• Capital Investments shows how much money you raise from an investor and from
yourself (the owner). In order to attract an investment from an investor, you should offer them an equity stake (ownership) in your company with an ownership share (%). Whatever the investor owns plus WHAT YOU OWN must total 100%. If you give up more than 50% of your company, you don't own it anymore. Your objective is to raise the most money but give up the least amount of equity (see The Shark Tank on www.hulu.com).
• Don't raise EXCESS capital. How can you tell? By looking at the cash flow
statement. If it shows an unusually high number at the end of the month for quarter 1, then we know that the amount of investments + owners money is higher than necessary. Investors don't want their money sitting around in a bank account. They want it invested into the business!